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Is California Self-Destructing? — George Gipe
Recessions create pain for everyone. Some people lose their jobs and/or their homes. Others have lower stock values, lower real estate values and business slowdowns. State and local governments have budget deficits. The real pain associated with the recession is unemployment and it can last for years.
With government revenues are down and the demands for services are rising, states and local governments are wrestling to close major budget deficits. With higher taxes unpopular, whenever there is a tax increase, the politicians usually take the path of least resistance.
And for California, that would be the sales tax.
While the challenge of determining the proper level of taxation and spending is very important, that issue is not addressed. The focus is exclusively on the selection of taxes to levy and the impact these taxes have on unemployment.
Ever since the passage of California's Proposition 13 in 1978, which dramatically reduced property taxes, California has been gradually raising sales taxes â€" both statewide and in various cities and counties.
How has this been working?
George W. Gipe, a published author on taxation, investigates unemployment in California and compares it unemployment in the nation and to other states. As the combined state and local sales tax rate in California has risen, the state unemployment has also risen, and remained consistently higher than the national level.
The poor results with the sales tax in California lead to a question: How have other states that rely heavily on a sales tax performed with unemployment?
Data from all 50 states is used to build a statistical model using multiple regression analysis to predict unemployment based upon several variables including the mix of taxes used by the states. No one likes taxes. Different taxes will create different incentives, which can impact the economy. The objective is to determine if a different mix of taxes results in a different level of unemployment for a state. While all information on which taxes are the most harmful to the economy is welcomed, the primary focus of this research is the sales tax. The null hypothesis that the sales tax rate in a state is not related to its unemployment is tested.
The final model produces strong evidence (>99.8%) that the sales tax increases unemployment in a state. The sales tax is a powerful job killer. Could we improve our national economy if several large states revised their mix of taxes to lower unemployment?
The conclusion includes suggestions for reducing or replacing the sales tax in California in order to undo the damage associated with it. Unfortunately, the state of California and its cities and counties keep raising sales taxes while the state's unemployment soars above the national average.
Is there any hope for saving California from this damage to its economy?
With government revenues are down and the demands for services are rising, states and local governments are wrestling to close major budget deficits. With higher taxes unpopular, whenever there is a tax increase, the politicians usually take the path of least resistance.
And for California, that would be the sales tax.
While the challenge of determining the proper level of taxation and spending is very important, that issue is not addressed. The focus is exclusively on the selection of taxes to levy and the impact these taxes have on unemployment.
Ever since the passage of California's Proposition 13 in 1978, which dramatically reduced property taxes, California has been gradually raising sales taxes â€" both statewide and in various cities and counties.
How has this been working?
George W. Gipe, a published author on taxation, investigates unemployment in California and compares it unemployment in the nation and to other states. As the combined state and local sales tax rate in California has risen, the state unemployment has also risen, and remained consistently higher than the national level.
The poor results with the sales tax in California lead to a question: How have other states that rely heavily on a sales tax performed with unemployment?
Data from all 50 states is used to build a statistical model using multiple regression analysis to predict unemployment based upon several variables including the mix of taxes used by the states. No one likes taxes. Different taxes will create different incentives, which can impact the economy. The objective is to determine if a different mix of taxes results in a different level of unemployment for a state. While all information on which taxes are the most harmful to the economy is welcomed, the primary focus of this research is the sales tax. The null hypothesis that the sales tax rate in a state is not related to its unemployment is tested.
The final model produces strong evidence (>99.8%) that the sales tax increases unemployment in a state. The sales tax is a powerful job killer. Could we improve our national economy if several large states revised their mix of taxes to lower unemployment?
The conclusion includes suggestions for reducing or replacing the sales tax in California in order to undo the damage associated with it. Unfortunately, the state of California and its cities and counties keep raising sales taxes while the state's unemployment soars above the national average.
Is there any hope for saving California from this damage to its economy?
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